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LONDON: Oil rose towards $113 a barrel on Tuesday as tensions over Iran's nuclear programme and unrest in Nigeria outweighed persistent concern about the strength of Europe's economy.
Iran has begun enriching uranium deep inside a mountain and sentenced an American to death for spying, angering the West and undermining expectations that diplomacy could avert further sanctions or war.
Brent crude rose 83 cents to $113.28 a barrel by 1010 GMT, following a decline of 61 cents on Monday. US crude was up $1.39 to $102.70.
“Despite demand conditions being relatively weak, oil prices are still above $100 because of the geopolitical tensions. There is a floor on prices at the moment,” said Natalie Robertson of ANZ.
The tension over Iran's nuclear programme, which Tehran insists is for peaceful purposes, have included Iran threatening to shut the Strait of Hormuz, the world's most important oil export route.
European Union states, which have already agreed in principle to an embargo on Iranian oil to ratchet up pressure on Tehran, are due to hold a meeting to decide on the measure on Jan. 23, EU diplomats said on Monday.
Iran produces 3.5 million barrels per day (bpd) of crude, making it the second largest producer in the Organization of the Petroleum Exporting Countries (OPEC) after Saudi Arabia. The EU imports about 500,000 bpd from Iran.
Supply risks were also in focus in Nigeria, where trade unions began a second day of strikes on Tuesday to protest against the removal of fuel subsidies. The strike has so far not affected shipments from Africa's largest oil exporter.
While threats to supplies supported oil prices, economic weakness in Europe limited gains.
The euro stayed under pressure on Tuesday, with markets nervous about the outlook for the region's economy and banks, prospects for government debt sales and a slowdown in the export-focused Chinese economy.
Even so, figures on Tuesday showed China's crude imports rose five per cent in December year-on-year, and analysts expect steady growth from the world's second largest consumer in 2012.
In top consumer the United States, crude stocks were expected to have risen last week by 200,000 barrels, a Reuters poll showed. Industry group the American Petroleum Institute issues its inventory report at 2130 GMT.
